A Little Breakout Here and There

This thread is dedicated to a a particular breakout idea I've had but never really traded. I imagine it would suit autotraders very well but unfortunately I don't have the coding skills to explore this further. I believe it has similarities to a Donchian Breakout.

The basic rules are as follows:

Longs: If the current bar's close is higher than the highs of the previous 2 bars, then enter at a break of this bar.Shorts: If the current bar's close is lower than the lows of the previous 2 bars, then enter at a break of this bar.If the trade isn't executed on the very next bar, then it is cancelled.

Take Profit and Stop Loss: Both set at whatever value ATR(50) is at the close of the current bar. An option could be to set TP at 2xATR. The theory is that although there will be less winners, in times of big movements, the profits can stack on. In this way, BE could be occur when the trade is in profit by 1xATR.

Pairs to Trade: I anticipate this works better on pairs that tend to trend more than others or break out at different market opening times.

Time Frame: I like the look of the 1 hour charts but signals occur on any time frame.

This is a trading idea that I'd like to experiment with and see if a profitable system could be made out of it. I welcome all constructive contributions! examples to follow...

In the 2nd example above, we can see that according to the rules, Breakouts 1, 4, 5, 6 , 7 were all valid and would have hit at least 1x the ATR. Breakouts 2 and 3 didn't trigger on the immediate next bars and so would have been cancelled.

Of course losses will occur especially during ranging times, but the beauty of this method is the breakout in itself acts as a filter and can place you at the start of big movements where a succession of trades can occur.

I welcome anybody and everybody to backtest this and tinker around, especially with timeframes, best times during the day to enter, stop/profit placement.

Simple mechanical system that doesn't require any interpretation, I think it has a lot of potential.

Long term you will probably have less then a 50% win rate, which will require a lot of discipline and a good RR. When you forward test it, think about using a trade copier and setup multiple demo accounts and try different RRs as well as using ATR.

Watch your win rate and RR and I'm sure you can make this work. Here is a chart for RR to break even, basically if you use a 1 risk: 2 reward you need a 34% win rate to break even and anything over 34% will be profit. Something to think about.

{quote} Simple mechanical system that doesn't require any interpretation, I think it has a lot of potential. Long term you will probably have less then a 50% win rate, which will require a lot of discipline and a good RR. When you forward test it, think about using a trade copier and setup multiple demo accounts and try different RRs as well as using ATR. Watch your win rate and RR and I'm sure you can make this work. Here is a chart for RR to break even, basically if you use a 1 risk: 2 reward you need a 34% win rate to break even and anything...

Ignored

yes, you're completely right. that's why I'm welcoming all suggestions on how to tweak it to minimize the losses and reap the gains.

This should give you a visual representation of what you propose (ATR part not included). Not a coder but I understand enough to tweak stuff, did a quick EA on something similar it wasvinteresting but not profitable. You can try though, your idea's will be different from mine.

P.S: This code was modified by me, original code is not mine, developer details left intact.

I'm going to try the strategy next week (small positions of course for now), with a slightly different take on your idea.

I think finding the directional bias from the daily or 4hr t/f is the first thing to establish.

I usually prefer finding a "value" level for my entries, and I can do that with your strategy by use of pending orders.

For the purposes of explanation, I've attached an h1 AU chart that doesn't strictly follow your rules, and uses 2 bars instead of 3 to decide whether I will have a set-up or not, and I will be simply looking for a lower low bar than the previous lower low bar if I'm selling and vice versa if I'm buying.

The example attached is not the finished product for me yet but gives an idea of my thinking along HPs idea. I'm thinking at this stage that stops and tps will require further thought, but initially I'm planning to use the previous trigger candles high/low plus a couple of pips, and my t/ps pre-set at say 10 pips for 50-75% of the total position for now say, and let the rest run, or something along those lines. This way I think it's quite possible to build up some free positions as add on trades are made.

The chart shows 4 horizontal lines which would have been the pending sells in this case. Using the method I've briefly described would have triggered 3 of these, and would have produced some tidy profits.

As I said earlier, I like HPs idea and as he said, it can be effective on all t/fs and I feel that with a little bit of thought concerning a directional bias in particular and the obvious mm aspects, then it could develop into a nice and tidy strategy.

Well done to HP, and keep posting your thoughts to help oneanother to get this working

I realise these are all hind sights at present, but seems promising and simple which is the best part of it.

Once again these could have been all pending long orders (based only on my view that that the bias is likely up in this case ref the green rectangle I drew), and again they are approx based upon 1/3 previous candle retracement to get a "value" trade.

8 trades could have been made, and portions of each kept for a potential "runner" until stopped.

[quote=sinqua; This should give you a visual representation of what you propose (ATR part not included). Not a coder but I understand enough to tweak stuff, did a quick EA on something similar it wasvinteresting but not profitable. You can try though, your idea's will be different from mine. P.S: This code was modified by me, original code is not mine, developer details left intact.[/quote]